It is an understatement to say that the shares of Facebook and Zynga are not doing well. Nevertheless I believe that investors still haven't grasped the full extent of the problems facing these companies. There are major trends in the way people use computers which could potentially kill Zynga, and seriously hurt Facebook. Consider this: This week's news about Facebook was that they launched a new iOS app allowing people to access Facebook on their iPhone or iPad twice as fast. They clearly understood the trend of "social" internet-use going mobile. But they missed over half of the picture: 53% of Facebook users play games, and 50% of Facebook logins are specifically to play a game. And even with the new app, you can't play Facebook games on iOS.

Facebook games are Flash, and iOS doesn't support Flash. Furthermore the more open Android mobile operating system will stop to support Flash in the future. Mobile Facebook will be Facebook without games, and that is just half of Facebook. Facebook without games makes no money at all for Zynga, and significantly less money for Facebook. Thus the more people are taking their social surfing mobile onto tablets, the less money Zynga and Facebook are making.

This is not some weird conspiracy of Apple hating Adobe, it has solid technical reasons. Flash takes a heavy toll out of processor resources, and tablets and smartphones have less of them. I have a high-end PC and Facebook games like Castleville are running more sluggish on it than a first-person shooter in high resolution. I installed an app on my iPad which allowed to run Flash games, but the result was simply unplayable. And the app refused to run on a 3G connection, it only runs on high-speed WiFi because Flash is so demanding.

I think Facebook might actually be a better place without the games, because its social model somewhat clashes with the spam that the games produce. Facebook works best with real friends, but Facebook games work best if you collect hundreds of fake friends with whom you only exchange virtual items in games, but who you don't otherwise know at all. So while the lost revenue might hurt Facebook, overall they can survive the trend to mobile. Zynga is another kettle of fish: They simply have no future on a Facebook running on tablets and smartphones. And while they might move to iOS games, that completely changes their market situation: Zynga is a big fish on Facebook, but a minnow in the App Store. Their whole business model of gaining huge number of players by spam to friends doesn't work outside of Facebook. My guess is they will do worse and worse in the future.

It isn't that Facebook missed part of the picture, it's that the picture is still being developed. Flash is antiquated and being phased out, but the Zyngas of the world are behind the curve instead of being like Apple (and Android to a certain extent) and getting out ahead of it. An ejoyable gaming experience through a browser and/or app like Facebook is completely possible, it's just *Flash* gaming that isn't. Once these companies get on board with developing their games with HTML5 and JavaScript, they will be easily accessible on mobile devices. And while these companies may develop their Objective-C based game apps, the fact that HTML5 based games are easier to develop, maintain and update will ensure that browser and in-app gaming will not die with Flash. Whether this happens before killing (or seriously damaging) Facebook is another matter entirely.

There is no "might" in Zynga's move to iOS. They are definitely there. They make almost as many mobile games as they do Facebook games. And the "with Friends" line of games works so well on mobile because of the turn based nature of them.

Zynga's games are mostly very shallow, but they have the capacity to bring a new game online, and even if the game gains 20,000,000 users in the first month, they have the technology to handle the traffic. If it flops, they move the capacity elsewhere.

Like Amazon, Zynga is a technology company. With thousands of flexible servers and legions of artists and programmers who can put a cutesy face on anything. Including other company's games.

Once they have a better technology to replace Flash (and HTML5 might be it) they will replace it. All of their servers will still work the same.

@MaartenOn mobile, native is certainly where Zynga and many other game developers are at now. I imagine most mobile developers would want a unified platform to save them from maintaining too many clients. HTML5 is still developing, so its hard to say whether that will take over for Flash or native mobile.

In the end it doesn't change that game developers like Zynga are going to put their content on whatever technology makes the most sense for their business. They aren't putting all of their eggs in the Flash basket.

It isn't that HTML5 runs slower on iOS, it's that Apple uses its Nitro JavaScript engine within Mobile Safari to speed up web apps. I could go into it in more detail but this article does a good job of that for me:

http://daringfireball.net/2011/03/nitro_ios_43

So, while the capacity exists to speed up HTML5 based apps on an iOS device, they aren't being bogged down by the iOS. They will run just fine within other native apps. They will just run faster within the Mobile Safari environment.

HTML5/JavaScript is the future. As I said before, Flash is antiquated. It's processor intensive, uses a bloated engine and, quite frankly, doesn't really do anything you can't do faster, better, and more maintenance friendly with an HTML5 base. I'm not saying Flash is disappearing any time soon, but its time has passed. There is no other reason to keep it around other than the fact that there are more people who know how to develop Flash based apps than there are people who know how to develop HTML5 based apps. Adobe is already starting the process of moving forward with their new Edge program, which I believe will replace their Flash programs in the next 5 years or so.